CLARITY Act rewrites the DeFi death register: Circle takes the lion's share, DeFi tokens bleed out

_Original author / _10x Research

Translated by / Odaily Planet Daily Golem（@web 3_golem）

This article examines the impact of the CLARITY Act on DeFi, and analyzes the risks investors may face in terms of potential winners and losers if the bill is implemented. While there are clear structural beneficiaries, the final outcome is not one where only a single company stands to gain. At the same time, investors should closely watch for new adverse factors that could affect the overall landscape.

The latest CLARITY proposal effectively ends the narrative of stablecoins as savings products. Although revenue-sharing is still permitted, the path for passing that revenue on to end users has been cut off. Coinbase can continue to earn yield through USDC, but it loses the most powerful growth lever—delivering yield to users—which creates a structural headwind for its distribution model. Meanwhile, Circle now needs to prove that its arrangement is legitimate profit sharing rather than a way to circumvent yield, bringing higher legal risk, potential contract restructuring, and continued regulatory scrutiny.

At its core, this is about control of money markets. Stablecoins are strictly defined as payment instruments rather than interest-bearing assets, effectively isolating yield inside banks and regulated financial instruments (such as money market funds and ETFs—for example, IQMM). This represents a re-concentration of yield.

USDC outstanding balance vs USDC trading volume

The CLARITY Act will be bad for DeFi

Even though the CLARITY framework is structurally favorable to Circle—supporting the adoption and valuation of USDC, even at the cost of reduced flexibility (e.g., revenue sharing, incentive mechanisms) and short-term margin compression—it still creates significant headwinds for DeFi. Many DeFi tokens and activities may need to be registered and reviewed for compliance, especially when governance and fee-generation mechanisms resemble an equity structure.

Some argue that the CLARITY framework could be good for DeFi, because a ban on yield would push users toward DeFi lending. However, that view assumes DeFi is unaffected by regulation. In reality, the CLARITY framework would very likely extend to front-end interfaces and restrict how stablecoins can be used within DeFi.

UNI-USDT vs Uniswap V3 TVL — DeFi momentum looks weak

10x’s view is that DeFi is not a beneficiary, but a victim. Structurally, this is bearish for DeFi tokens, because reduced flexibility, stronger compliance, and the potential restriction of stablecoin usage will all pressure liquidity, activity, and ultimately valuation.

The key overlap is stablecoins. Circle (CRCL) and Uniswap both heavily rely on USDC as the core liquidity for trading and settlement. For Uniswap specifically, stricter regulation may create pressure on front-end interfaces, token listings, and liquidity incentive mechanisms, and could introduce layers of KYC and compliance. This would directly affect fee revenue, token velocity, and unpermissioned access, potentially leading to lower trading volume, reduced composability, and shrinking liquidity pools.

CRCL (white) vs UNI-USDT (indigo) — Circle is moving away from DeFi

Under the CLARITY Act, the assets most likely to be affected are DeFi tokens and governance tokens whose value is tied to fee revenue. DEX tokens such as UNI, SUSHI, DYDX, 1INCH, and CAKE face direct risk because their governance-and-yield model is similar to equity, which may require a regulated front end. Likewise, lending and yield protocols such as AAVE and COMP are also under scrutiny due to their interest-accrual structures and revenue-sharing mechanisms, which could be categorized as unregistered financial products.

MKR will become a beneficiary of the yield re-centralization trend

The market seems to have largely digested these factors already, so a structural revaluation driven solely by the CLARITY Act is unlikely. In 2026, MKR’s performance is better than USDT, thanks to its unique positioning within the evolving yield landscape. Unlike most DeFi tokens, Maker generates real yield by investing in U.S. Treasuries and other real-world assets, and that yield is ultimately distributed to MKR holders through surplus mechanisms.

At the user level, in a regulatory environment where stablecoin yield is increasingly constrained, value is concentrating at the issuer level or the protocol layer—Maker’s structure already enables it to benefit from this shift. As a result, MKR’s pricing is more often viewed as a “crypto market equity” that generates yield rather than a speculative DeFi token. MKR/USDT also appears to be an indicator that is ahead of CRCL.

MKR/USDT (white) vs CRCL (indigo)

Meanwhile, MKR is in sharp contrast to stablecoins like USDT, which—even at large scale—do not directly pass economic value through to token holders. This creates a structural difference, especially in an environment where high interest rates continue to support Maker’s income flow.

It’s important to note that MKR is more of an exception. While most DeFi tokens face adverse effects from tighter regulation and limits on stablecoin usage, Maker’s early integration of real-world assets and its semi-compliant structure make it a beneficiary of the yield re-centralization trend.

More broadly, most DeFi protocols rely on USDC as collateral and settlement infrastructure. If regulation restricts how USDC can be used in DeFi, liquidity could fall, trading volume could decrease, and token valuations would face downward pressure.

Ultimately, the CLARITY Act may not only regulate crypto—it could also reshape the entire DeFi ecosystem. The beneficiaries may be compliance infrastructure providers like Circle, exchanges, and custodians (BitGo), while the losers are tokens tied to permissionless finance and fee extraction. In this context, any token that behaves like equity within a financial protocol (such as Uniswap) and remains unregulated will face structural downside risk under this framework.

Is Circle still worth investing in?

According to the latest discussions, the CLARITY Act proposal would prohibit platforms from directly or indirectly providing yield to stablecoin holders, especially certain yield-like arrangements akin to bank deposits. This restriction would broadly apply to digital asset service providers, including exchanges, brokers, and their affiliates, and would explicitly target any structures “economically or functionally equivalent to” interest.

Although the bill allows for activity-based rewards—such as loyalty programs, promotions, or subscription plans—these rewards may not, in any way, be linked to balances or trading volume in order to mimic interest yield. In practice, this greatly limits how incentive mechanisms can be constructed, and clearly draws a line: stablecoins cannot operate as interest-bearing deposit accounts.

Circle seems to have become a structural winner, while Coinbase faces structural headwinds, and BitGo sits somewhere in between. BitGo’s market value dropped from about $2–$2.5 billion at IPO to around $1.14 billion, but its valuation became more attractive as a result. Based on the company’s performance over the past 12 months, it generated profits of about $57 million, with a price-to-earnings ratio of 20x. For a regulated crypto infrastructure provider with a solid institutional-investor position, this valuation is not expensive.

BitGo vs Circle — BitGo’s share price plunged 50% after its IPO

However, earnings quality is still a key constraint. Its reported revenue is inflated by total trading volume, while actual profit margins are low (net profit margin below 1%), which makes BitGo’s structure closer to a low-margin custody and execution platform rather than a high-margin balance sheet model like Circle or Tether.

Therefore, although BitGo’s valuation becomes more reasonable after the drop and asymmetry improves—leaving limited downside room—it is still an infrastructure company with low beta, not a candidate stock for a valuation re-rating. By contrast, Circle still has stronger investment opportunities; changes in regulatory policy could significantly change its profit margins and valuation.

Tether hiring top-tier (Big Four level) audit firms will mark an important step forward in institutional credibility, showing improvements in transparency, governance, and readiness to operate under stricter financial regulatory frameworks. While this does not guarantee success in getting listed, it clearly lowers one of the key hurdles to listing, and if the regulatory environment becomes more favorable, it may also signal a higher likelihood of future listings.

This move will have a direct impact on Circle: increased competition from a more institutionalized Tether could compress Circle’s relative valuation premium, but it will also validate the overall effectiveness of the stablecoin model and may expand its potential market size. In that sense, a more transparent Tether aligned with institutions would both challenge Circle’s market position and strengthen the broader argument that stablecoins are core financial infrastructure.

Even after the CLARITY Act, Circle is unlikely to reach Tether’s profit margins, but the gap between the two could narrow significantly. Tether’s margins are higher because it retains nearly all reserve yield, faces fewer regulatory constraints, and has a very low revenue-share ratio. Even under the CLARITY framework that restricts yield transfer, Circle will still face higher compliance costs, stricter reserve requirements, and potentially continued (though renegotiated) revenue sharing arrangements with distribution partners such as Coinbase.

The CLARITY Act obviously can improve Circle’s profit margins. If yield cannot be transferred to users, the issuer captures more economic value, and Circle’s bargaining power in renegotiations will also strengthen. Coupled with scale and adoption by institutional users, this could drive a significant increase in margins, from the current low teens percentage range gradually up to above 20%.

If USDC continues to grow at a similar pace, Circle’s valuation is reasonable. Over the past 18 months, USDC’s circulating supply increased by about $46 billion to $79 billion, indicating very high adoption. As a settlement and liquidity layer, Circle currently generates gross revenue based on a 4% reserve yield; after revenue sharing and costs, net income is about $2.0 billion to $2.3 billion.

If USDC expands to $120 billion to $150 billion, gross revenue could rise to $4.8 billion to $6.0 billion; if margins improve to 20% to 25%, net income could reach $1.0 billion to $1.4 billion. If a 25 to 30x P/E multiple is applied, the valuation range would be approximately $25 billion to $42 billion, above the current market cap of around $24.5 billion.

However, this valuation framework is highly dependent on USDC’s continued growth. Recent data shows USDC supply growth has begun to stall, suggesting the market is starting to expect its growth rate to accelerate again. Therefore, Circle’s investment case is no longer just a valuation re-rating driven by regulatory tailwinds; it is increasingly dependent on growth. Both the sustained expansion of USDC and improvements in economic efficiency need to happen to support the current share price level.

10x expects a base-case target price of $120 over the next 12 months. If USDC growth accelerates again and margins improve significantly, it could rise to $150; but if growth stalls and the current economic conditions persist, there is risk of a decline to $80.

Summary

The CLARITY Act accelerates the transition of stablecoins toward regulated products, especially when combined with developments such as the GENIUS ETF framework and Treasury-supported structures. The end result is that stablecoin reserves move to regulated money market products. This dynamic is a structural positive for infrastructure participants like Circle, but a negative impact for DeFi tokens and protocols that rely on yield.

Before the CLARITY Act is introduced (if passed), stablecoins are a hybrid tool: they can function as payment instruments, generate yield, and also serve as core collateral for DeFi. Under the proposed framework, this model undergoes a fundamental shift: stablecoins are defined as only payment instruments, and yield is limited to regulated products.

This leads to an obvious redistribution of value. Potential winners include Circle, Treasury-backed ETF structures, and custodians or other compliant financial infrastructure; on the other hand, Coinbase’s monetization flexibility is reduced, while DeFi yield protocols and “earn” products face structural headwinds.

In reality, the Office of the Comptroller of the Currency (OCC) not only restricts yield, but also redefines who can receive it. The result is that economic value shifts from crypto-native channels (Coinbase and DeFi) to regulated financial infrastructure.

The CLARITY Act’s main beneficiaries may be Circle, MKR, and BitGo, even though BitGo’s profit margins are still low; its roughly 50% drop after listing makes its valuation more attractive. Meanwhile, Coinbase and a series of DeFi protocols—including 1inch, Aave, COMP, dYdX, Sushi, and Uniswap—are structurally at a disadvantage. To some extent, the market has already begun to price in these changes; rather than acting as a new catalyst, the CLARITY Act is more like a reinforcement of an existing trend.

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